Starbucks CEO Will Step Down
Starbucks CEO Howard Schultz will step down from his role as coffee king on April 2, The Seattle Times reports. Schultz transformed Starbucks into a global brand and multi-billion dollar company. He will keep his salary and remain with Starbucks as an executive chairman, focusing on the company’s premium businesses.
Howard Schultz joined Starbucks in 1982 and bought the company with a team of investors in 1987. The $3.8 million dollar investment would prove lucrative, as Starbucks has a market value of around $83 billion dollars. CEO Howard Schultz took home $21.8 million last year and is worth an estimated $3 billion.
He took the company from 17 stores to 165 when it went public in 1992.
The biggest growth spike in Starbucks stock took place after 2008, when Howard Schultz returned as CEO. He had stepped down in 2000 but remained on as Chairman of the Board. Once he returned, the company shot up to its current level above the $80 billion mark in an almost perfectly upward trajectory. Although some companies struggled through the recession, Starbucks stock climbed and climbed.
Instead of just serving coffee, Howard Schultz wanted to create a culture around it. Patti Williams of the Wharton School of business at the University of Pennsylvania explained how he transformed the social perception of coffee from something you brew at home to a savory treat.
“One of the things he did right was he made coffee a luxury in a way it hadn’t been previously: something to be savored and appreciated.”
He closed hundreds of U.S. stores during the recession while expanding into global markets, and famously closed every Starbucks for three hours in order to retrain baristas in the core value of making coffee. These actions sent a strong message to customers that they would be treated well as Starbucks patrons and Schultz was able to steadily charge gradually higher prices at the coffee chain.
Today, Starbucks’ domination of the coffee market is being nibbled away from the top. Even more luxurious coffee merchants like Intelligentsia and Stumptown nip away at Starbucks’ profits and market domination by catering to even higher-end customers and charging even higher prices. These companies have invented new drinks and brewing techniques that ousted Starbucks from their spot as the favorite of coffee connoisseurs.
Once Schultz steps down as CEO, he will stay on at the company as executive chairman. His plan is to tackle these premium markets and help Starbucks regain its position at the top of the market.
Schultz appears to have an unprecedented arrangement with Starbucks when it comes to his salary. Last time he stepped down as CEO, Schultz continued to receive pay equal to the current CEO. Documents later revealed that the board had agreed to pay him at least as much as they paid the CEO that replaced him. Although there’s no way of knowing if that will be the case this time, industry insiders say that although taking a pay cut would send the right message to shareholders, Schultz is expected to continue receiving the company’s largest paycheck. Current COO Kevin Johnson will take over as CEO when Schultz steps down on April 2.
Schultz has transformed his coffee company and with it, the social landscape. By staying on as executive chairman and likely not taking much if any of a paycut, Schultz will continue to reign as the coffee king. Targeting the high-end market–the strategy that brought Starbucks to the top–is the area he will continue to focus on in his new, specified role at the company. With this move, Starbucks wants to continue their aggressive dominance in the coffee market.
[Featured Image by Stephen Chernin/Getty Images]
